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Hong Kong’s mortgage measures may dampen sentiment

July 2015

The Hong Kong Monetary Authority (HKMA) chief executive Mr. Norman Chan Tak-lam announced a new round of mortgage tightening measures in February 2015 to cool the overheated housing market, targeting the small-to-medium sized flats. Undercurrents of economic uncertainty are growing already as prices for both the private and public homes broke new records despite government cooling measures and repeated warnings of interest rate hikes.

Private homes soared 14% in 2014 in spite of hefty levies. The introduction of further countercyclical measures is to safeguard the stability of the banking and financial system, the HKMA chief executive, Mr. Norman Chan Tak-lam said.

“The surge in home prices in 2014 has prompted HKMA to roll out further anti-cyclical measures, which reflects the government’s strong determination to cool the market. The new tightening mortgage lending rule will inevitably affect some of the users and first time home buyers. The HKMA had introduced several rounds of mortgage tightening in the past but the impact was very short-lived and yet property prices continued with its upward cycle. All these administrative measures have distorted the market by reducing supply in the secondary market and strengthening demand for smaller apartments. The most fundamental and ultimate solution is to increase housing supply,” says Colliers.

The property consultant added that the new rules will dampen the market sentiment, but the potential hit is manageable by major developers.